Mortgage Gift Letter - What is it and how to write it?

Mortgage Gift letter is what the donor of the gift writes to the lender stating that he has offered a gift of money to the home buyer.

Homebuyers often require extra funds to make their down payment or pay part/whole of their closing costs when there is shortage of cash to pay for these upfront costs. They can borrow from a non-profit organization but lenders often do not prefer borrowed money as the down payment. In this situation, cash gift from family members is very helpful.

When a gift is made available to a homebuyer applying for a mortgage, he needs to write a mortgage gift letter signed by the donor and attach it with the loan application form. At times, the lender may also provide the buyer with a Gift Letter form which the latter only needs to fill out.

However, if the gift is made by any non-family member such as friend, employer, etc, then a borrower needs to provide documentation of a very close and long lasting relationship.

How to write Mortgage Gift letter

A mortgage gift letter includes the following:

Name of donor of the gift

Name of the recipient

Relationship between the donor and recipient

Cash amount gifted

Address of the property for which gift is made

Source of the funds (bank account, brokerage account etc) as offered by the donor.

Apart from the above, the gift letter should also state that the buyer need not repay the gift amount. Also, the lender should be assured that the gift funds were not made available to the donor from any person involved with the sale of the property including the seller, broker, real estate agent, loan officer or builder etc.

With gift of money, a buyer can afford to purchase a bigger house. At the same time, he can borrow less and thus reduce his monthly payments. However, the homebuyer needs to provide a written statement and prove that the money he's putting down is a gift. Here's where a mortgage gift letter serves its purpose.

charles (and others): you'll likely never have to worry about the loan number. for one thing, those things often change; for another, most borrowers don't know the loan number early on in the process. lots of times, they're not given to a borrower until closing (and who's paying attention then?).

as for a $40K gift on a $320K purchase; that would allow a borrower to reduce the loan amount as low as $280K. an alternative is to use most of the gift money for down payment and the rest of it for closing costs. this, of course, would result in a higher loan amount than the $280K noted, but would alleviate the need to liquidate other funds to cover the closing.

the beauty of a gift is that it allows a borrower some flexibility in how funds are allocated._________________George M. Akerley
Mortgage Consultant
Word of Excellence- Writing/Editing/Proofreading

You may have to pay gift tax on the funds you receive as gift from any family member or anyone provided the gift amount doesn't exceed $12,000 and you don't qualify for the gift tax exemptions. It's always advisable to check this out with a CPA or financial advisor.

I have given $20000 for the downpayment of a house .I signed a gift letter with no terms or repayment required just to show the lender.The borrower didnt sign any document to pay me back but said as soon as his situation improves he will pay me the sum withou any interest. If he doesnt pay me will I have any way of getting my money back.

To add insult to injury, you signed a document that says the money is a "Gift". As a result, you would have no leg to stand on in court. Your best bet is to reason with this person and use some other type of measures to get your money back._________________Eric JLow Down Payment, No PMI !FHA RATE QUOTEMortgage Rate Quote

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